What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-03 · 172 added, 154 removed, 349 unchanged (48% of the section changed)

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Please refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements.

Throughout the following discussion, we explain changes between the three months ended March 31, 2024, and the three months ended December 31, 2023 (“sequential quarterly” or “sequentially”), as well as the year-to-date (“YTD”) change between the three months ended March 31, 2024, and the three months ended March 31, 2023 (“YTD 2024-over-YTD 2023”).

Additionally, the following discussion includes sequential quarterly comparison to the financial information presented in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 3, 2024.

Throughout the following discussion, we explain changes between the three months ended June 30, 2024, and the three months ended March 31, 2024 (“sequential quarterly” or “sequentially”), as well as the year-to-date (“YTD”) change between the six months ended June 30, 2024, and the six months ended June 30, 2023 (“YTD 2024-over-YTD 2023”).

Overview of the Company

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Our near-term goals include focusing on continued operational excellence and continuing to return value to stockholders through our Stock Repurchase Program and fixed dividend payments.

Our asset portfolio is comprised of high-quality assets in the Midland Basin of West Texas and in the Maverick Basin of South Texas that we believe are capable of generating strong returns in the current macroeconomic environment and provide resilience to commodity price risk and volatility.

We seek to maximize returns and increase the value of our top-tier assets through disciplined capital spending, strategic acquisitions, and continued development and optimization of our existing assets.

Our asset portfolio is currently comprised of high-quality assets in the Midland Basin of West Texas and in the Maverick Basin of South Texas that we believe are capable of generating strong returns in the current macroeconomic environment and provide resilience to commodity price risk and volatility.

We seek to maximize returns and increase the value of our top-tier assets through disciplined capital spending, strategic acquisitions, including the recently announced pending XCL Acquisition, and continued development and optimization of our existing assets.

We believe that our high-quality assets facilitate a sustainable approach to prioritizing operational execution, maintaining a strong balance sheet, generating cash flows, returning capital to stockholders, and maintaining financial flexibility.

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We are impacted by global commodity and financial markets that remain subject to heightened levels of uncertainty and volatility.

While inflation continues to affect certain aspects of our business, the extent of its impact decreased in the first quarter of 2024 compared to 2023.

While inflation continues to affect certain aspects of our business, the extent of its impact decreased in the first half of 2024 compared with 2023.

Continued oil production curtailment agreements among the Organization of the Petroleum Exporting Countries (“OPEC”) plus other non-OPEC oil producing countries (collectively referred to as “OPEC+”), instability in the Middle East, economic and trade sanctions associated with the wars between Russia and Ukraine and Israel and Hamas, United States Federal Reserve monetary policy, shipping channel constraints and disruptions, and changes in global oil inventory in storage have driven commodity price volatility, contributed to instances of supply chain disruptions and fluctuations in interest rates, and could have further industry-specific impacts that may require us to adjust our business plan.

For additional detail, please refer to the Risk Factors section in Part I, Item 1A of our 2023 Form 10-K .

For additional detail, please refer to the Risk Factors section in Part I, Item 1A of our 2023 Form 10-K , and Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on July 18, 2024.

Despite continuing uncertainty, we expect to maximize the value of our high-quality asset base and sustain strong operational performance and financial stability.

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Our Midland Basin assets are comprised of approximately 110,000 net acres located in the Permian Basin in West Texas (“Midland Basin”).

In the first quarter of 2024, our drilling and completion activities focused on development optimization of our RockStar and Sweetie Peck assets, and delineation and development of our Klondike assets.

In the second quarter of 2024, our drilling and completion activities focused on development optimization of our RockStar and Sweetie Peck assets, and delineation and development of our Klondike assets.

Our Midland Basin position provides substantial future development opportunities within multiple oil-rich intervals, including the Spraberry and Wolfcamp formations.

Our South Texas assets are comprised of approximately 155,000 net acres located in Dimmit and Webb Counties, Texas (“South Texas”).

In the first quarter of 2024, we focused our operations on development and further delineation of the Austin Chalk formation, and on production from both the Austin Chalk formation and Eagle Ford shale formation.

Our overlapping acreage position in the Maverick Basin in South Texas covers a significant portion of the western Eagle Ford shale and Austin Chalk formations, and includes acreage across the oil, gas-condensate, and dry gas windows with gas composition amenable to processing for NGL extraction.

First Quarter 2024 Overview and Outlook for the Remainder of 2024

During the first quarter of 2024, we continued to execute on our goal of sustainably returning capital to our stockholders through our Stock Repurchase Program and fixed quarterly dividend by repurchasing and subsequently retiring approximately 0.7 million shares of our outstanding common stock at a cost of $32.8 million, excluding excise taxes, commissions, and fees, and paying a quarterly dividend of $0.18 per share totaling $20.8 million.

Please refer to Note 3 - Equity in Part I, Item 1 of this report for additional discussion of our Stock Repurchase Program.

In the second quarter of 2024, we focused our operations on development and further delineation of the Austin Chalk formation, and on production from both the Austin Chalk formation and Eagle Ford shale formation.

Our overlapping acreage position in the Maverick Basin in South Texas covers a significant portion of the western Eagle Ford shale and Austin Chalk formations, and

includes acreage across the oil, gas-condensate, and dry gas windows with gas composition amenable to processing for NGL extraction.

Second Quarter 2024 Overview and Outlook for the Remainder of 2024

During the second quarter of 2024:

• We entered into the XCL Acquisition Agreement to purchase the Uinta Basin Assets and, subsequent to June 30, 2024, exercised the option to purchase the Option Assets as discussed in Note 11 - Acquisitions in Part I, Item I of this report.

Full-year 2024 trends discussed below do not reflect our expectations related to the pending XCL Acquisition.

• Our Board of Directors re-authorized our existing Stock Repurchase Program, which authorizes us to repurchase up to $500.0 million in aggregate value of our common stock through December 31, 2027.

• Our Board of Directors approved an increase to our fixed dividend policy, pursuant to which we intend to pay $0.20 per share per quarter, beginning in the fourth quarter of 2024.

• We continued to execute on our goal of sustainably returning capital to our stockholders through our Stock Repurchase Program and fixed quarterly dividend by repurchasing and subsequently retiring approximately 1.1 million shares of our outstanding common stock at a cost of $51.2 million, excluding excise taxes, commissions, and fees, and paying a quarterly dividend of $0.18 per share totaling $20.7 million.

Please refer to Note 3 - Equity in Part I, Item 1 of this report for additional discussion.

Financial and Operational Results.

Average net daily equivalent production for the three months ended March 31, 2024, decreased five percent sequentially to 145.1 MBOE, consisting of an eight percent decrease from our South Texas assets and a three percent decrease from our Midland Basin assets, resulting from the timing of well completions.

Realized price per BOE, before the effect of net derivative settlements (“realized price” or “realized prices”), remained flat sequentially.

During the first quarter of 2024, oil and gas benchmark prices decreased and the NGL benchmark price increased.

These changes resulted in sequential quarterly decreases in oil and gas realized prices of two percent and 12 percent, respectively, offset by an increase in NGL realized price of five percent.

As a result of the decrease in average net daily equivalent production volumes, oil, gas, and NGL production revenue decreased eight percent to $559.6 million for the three months ended March 31, 2024, from $606.9 million for the three months ended December 31, 2023.

Oil, gas, and NGL production expense of $10.41 per BOE for the three months ended March 31, 2024, increased seven percent sequentially, primarily as a result of increases in ad valorem tax expense per BOE and lease operating expense (“LOE”) per BOE, partially offset by a decrease in production tax expense per BOE.

We recorded a net derivative loss of $28.1 million and a net derivative gain of $80.5 million for the three months ended March 31, 2024, and December 31, 2023, respectively.

Included within these amounts are net derivative settlement gains of $13.3 million and $6.5 million for the three months ended March 31, 2024, and December 31, 2023, respectively.

Operational and financial activities during the three months ended March 31, 2024, resulted in the following:

• Net cash provided by operating activities of $276.0 million, compared with $476.5 million for the three months ended December 31, 2023.

• Net income of $131.2 million, or $1.13 per diluted share, compared with net income of $247.1 million, or $2.12 per diluted share, for the three months ended December 31, 2023.

• Adjusted EBITDAX, a non-GAAP financial measure, of $409.0 million, compared with $445.1 million for the three months ended December 31, 2023.

Average net daily equivalent production for the three months ended June 30, 2024, increased nine percent sequentially to 158.5 MBOE, consisting of a 12 percent increase from our South Texas assets and a seven percent increase from our Midland Basin assets.

These increases were a result of production from new wells which more than offset the natural decline in production from existing wells during the second quarter of 2024.

Realized price per BOE, before the effect of net derivative settlements (“realized price” or “realized prices”), increased four percent sequentially.

During the second quarter of 2024, the oil benchmark price increased, and gas and NGL benchmark prices decreased.

These changes resulted in a sequential quarterly increase in oil realized price of six percent, partially offset by a decrease in gas realized price of 36 percent.

The NGL realized price remained flat sequentially.

As a result of the increase in average net daily equivalent production volumes, oil, gas, and NGL production revenue increased 13 percent sequentially to $633.5 million for the three months ended June 30, 2024, compared with $559.6 million for the three months ended March 31, 2024.

Oil, gas, and NGL production expense of $9.47 per BOE for the three months ended June 30, 2024, decreased nine percent sequentially, primarily as a result of decreases in lease operating expense (“LOE”) per BOE, transportation costs per BOE, and ad valorem tax expense per BOE.

We recorded a net derivative gain of $12.1 million and a net derivative loss of $28.1 million for the three months ended June 30, 2024, and March 31, 2024, respectively.

Included within these amounts are net derivative settlement gains of $16.5 million and $13.3 million for the three months ended June 30, 2024, and March 31, 2024, respectively.

Operational and financial activities during the three months ended June 30, 2024, resulted in the following:

• Net cash provided by operating activities of $476.4 million, compared with $276.0 million for the three months ended March 31, 2024.

• Net income of $210.3 million, or $1.82 per diluted share, compared with net income of $131.2 million, or $1.13 per diluted share, for the three months ended March 31, 2024.

• Adjusted EBITDAX, a non-GAAP financial measure, of $485.9 million, compared with $409.0 million for the three months ended March 31, 2024.

Please refer to the caption Non-GAAP Financial Measures below for additional discussion and our definition of adjusted EBITDAX and reconciliations to net income and net cash provided by operating activities.

Please refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between the Three Months Ended March 31, 2024, and December 31, 2023, and Between the Three Months Ended March 31, 2024, and 2023 below for additional discussion.

Please refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between the Three Months Ended June 30, 2024, and March 31, 2024, and Between the Six Months Ended June 30, 2024, and 2023 below for additional discussion.

Operational Activities.

We expect our total 2024 capital program to be between $1.14 billion and $1.18 billion, excluding acquisitions.

This reflects a decrease from our original expectation primarily as a result of capital efficiencies and lower-than-expected costs.

We expect our total 2024 capital program to be between $1.14 billion and $1.18 billion, excluding acquisitions, and excluding any expected capital expenditures related to the Uinta Basin Assets and the Option Assets.

Our capital program remains focused on highly economic oil development projects in both our Midland Basin and South Texas assets.

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Please refer to Overview of Liquidity and Capital Resources below for discussion of how we expect to fund the remainder of our 2024 capital program.

In our Midland Basin program, we operated four drilling rigs and two completion crews, drilled 19 gross (17 net) wells, and completed 16 gross (11 net) wells during the first quarter of 2024.

Average net daily equivalent production volumes decreased sequentially by three percent to 74.5 MBOE.

Costs incurred during the three months ended March 31, 2024, totaled $182.4 million, or 57 percent of our total costs incurred for the period.

In our Midland Basin program, we operated an average of four drilling rigs and averaged two completion crews, drilled 24 gross (21 net) wells, and completed 32 gross (26 net) wells during the second quarter of 2024.

Average net daily equivalent production volumes increased sequentially by seven percent to 79.7 MBOE.

Costs incurred during the three months ended June 30, 2024, totaled $202.4 million, or 61 percent of our total costs incurred for the period.

We anticipate operating four drilling rigs and between one and two completion crews for the remainder of 2024, focused on developing formations within our RockStar, Sweetie Peck, and Klondike assets.

In our South Texas program, we operated two drilling rigs and one completion crew, drilled 12 gross (12 net) wells, and completed 16 gross (16 net) wells during the first quarter of 2024.

Average net daily equivalent production volumes decreased sequentially by eight percent to 70.6 MBOE.

Costs incurred during the three months ended March 31, 2024, totaled $129.0 million, or 40 percent of our total costs incurred for the period.

In our South Texas program, we operated two drilling rigs and one completion crew, drilled 10 gross (10 net) wells, and completed 10 gross (10 net) wells during the second quarter of 2024.

Average net daily equivalent production volumes increased sequentially by 12 percent to 78.8 MBOE.

Costs incurred during the three months ended June 30, 2024, totaled $117.9 million, or 36 percent of our total costs incurred for the period.

We anticipate operating two drilling rigs and averaging one completion crew for the remainder of 2024, focused primarily on developing the Austin Chalk formation.

The table below provides a quarterly summary of changes in our drilled but not completed well count and current year drilling and completion activity in our operated programs for the three months ended March 31, 2024:

Midland Basin South Texas (1)

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42 35 33 33 75 68

Wells drilled 24 21 10 10 34 31

Wells completed (32) (26) (10) (10) (42) (36)

Wells drilled but not completed at June 30, 2024

34 30 33 33 67 63

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(1) As of December 31, 2023, the drilled but not completed well count included nine gross (nine net) wells that were not included in our five-year development plan as of December 31, 2023, eight of which were in the Eagle Ford shale.

Costs Incurred.

Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, totaled $320.2 million for the three months ended March 31, 2024, and were primarily incurred in our Midland Basin and South Texas programs as discussed in Operational Activities above.

Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, totaled $331.9 million and $652.1 million for the three and six months ended June 30, 2024, respectively, and were primarily incurred in our Midland Basin and South Texas programs as discussed in Operational Activities above.

Production Results.

The table below presents our net production by product type for each of our assets for the periods presented:

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

Midland Basin Net Production:

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Amounts may not calculate due to rounding.

Oil, Gas, and NGL Prices

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While quoted NYMEX oil and gas and OPIS NGL prices are generally used as a basis for comparison within our industry, the prices we receive are affected by quality, energy content, location and transportation differentials, and contracted pricing benchmarks for these products.

The following table summarizes commodity price data, as well as the effect of net derivative settlements, for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023:

The following table summarizes commodity price data, as well as the effect of net derivative settlements, for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023:

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 March 31, 2024 June 30, 2023

Oil (per Bbl):

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Our realized prices at local sales points may also be affected by infrastructure capacity or outages in the areas of our operations and beyond.

We expect the realized price for our Midland Basin gas production during the second and third quarters of 2024 to be impacted by residue pipeline capacity constraints;

The realized price for our Midland Basin gas production was impacted by residue pipeline capacity constraints during the second quarter of 2024, and we expect that to continue during the third quarter of 2024;

however, a portion of any negative impact to the realized price would be mitigated by our commodity derivative contracts, which are discussed below.

The following table summarizes 12-month strip prices for NYMEX WTI oil, NYMEX Henry Hub gas, and OPIS NGLs as of April 25, 2024, and March 31, 2024:

As of April 25, 2024 As of March 31, 2024

The following table summarizes 12-month strip prices for NYMEX WTI oil, NYMEX Henry Hub gas, and OPIS NGLs as of July 31, 2024, and June 30, 2024:

As of July 31, 2024 As of June 30, 2024

NYMEX WTI oil (per Bbl) $ 74.98 $ 78.27

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We make decisions about the amount of our expected production that we cover by derivatives based on the amount of debt on our balance sheet, the level of capital commitments and long-term obligations we have in place, and the terms and futures prices that are made available by our approved counterparties.

With our current commodity derivative contracts, we believe we have partially reduced our exposure to

volatility in commodity prices and basis differentials in the near term.

With our current commodity derivative contracts, we believe we have partially reduced our exposure to volatility in commodity prices and basis differentials in the near term.

Our use of costless collars for a portion of our derivatives allows us to participate in some of the upward movements in oil and gas prices while also setting a price floor below which we are insulated from further price decreases.

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Financial Results of Operations and Additional Comparative Data

The tables below provide information regarding selected production and financial information for the three months ended March 31, 2024, and the preceding three quarters:

The tables below provide information regarding selected production and financial information for the three months ended June 30, 2024, and the preceding three quarters:

For the Three Months Ended

March 31, December 31, September 30, June 30,

June 30, March 31, December 31, September 30,

2024 2024 2023 2023

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For the Three Months Ended

March 31, December 31, September 30, June 30,

June 30, March 31, December 31, September 30,

2024 2024 2023 2023

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Overview of Selected Production and Financial Information, Including Trends

For the Three Months Ended Amount Change Between the Three Months Ended Percent Change Between the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023 March 31, 2024 & December 31, 2023

March 31, 2024 & 2023

March 31, 2024 & December 31, 2023

March 31, 2024 & 2023

For the Three Months Ended Amount Change Between Periods Percent Change Between Periods For the Six Months Ended Amount Change Between Periods Percent Change Between Periods

June 30, March 31, June 30, June 30,

2024 2024 2024 2023

Net production volumes:

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(1) Amounts and percentage changes may not calculate due to rounding.

(2) Net derivative settlements for the three months ended March 31, 2024, and 2023, are included within the net derivative (gain) loss line item in the accompanying statements of operations.

(2) Net derivative settlements for the three months ended June 30, 2024, and for the six months ended June 30, 2024, and 2023, are included within the net derivative (gain) loss line item in the accompanying statements of operations.

(3) Please refer to Note 9 - Earnings Per Share in Part I, Item 1 of this report for additional discussion.

Average net daily equivalent production for the three months ended March 31, 2024, decreased five percent sequentially, consisting of an eight percent decrease from our South Texas assets and a three percent decrease from our Midland Basin assets, resulting from the timing of well completions.

Average net daily equivalent production remained flat YTD 2024-over-YTD 2023.

Average net daily equivalent production for the three months ended June 30, 2024, increased nine percent sequentially, consisting of a 12 percent increase from our South Texas assets and a seven percent increase from our Midland Basin assets.

These increases were a result of production from new wells which more than offset the natural decline in production from existing wells during the second quarter of 2024.

Average net daily equivalent production remained flat YTD 2024-over-YTD 2023, as a five percent increase from our Midland Basin assets, was mostly offset by a three percent decrease from our South Texas assets.

We expect a slight increase in total net equivalent production for the full-year 2024, compared with 2023, driven by well performance and increased development pace, excluding the effects of the pending XCL Acquisition.

We present certain information on a per BOE basis in order to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis and discussion.

Our realized price on a per BOE basis decreased $0.60 sequentially, primarily as a result of decreases in oil and gas benchmark prices, and decreased $0.92 YTD 2024-over-YTD 2023, primarily as a result of decreases in gas and NGL benchmark prices.

For the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, we recognized net gains on the settlement of our commodity derivative contracts of $1.01 per BOE, $0.46 per BOE, and $0.39 per BOE, respectively.

LOE on a per BOE basis increased four percent sequentially and seven percent YTD 2024-over-YTD 2023.

The sequential quarterly increase was a result of decreased average net daily equivalent production and a slight shift in our production mix from our South Texas assets to our Midland Basin assets, which have higher unit operating costs.

The YTD 2024-over-YTD 2023 increase was primarily driven by increases in labor costs.

The full-year 2024 trends discussed below do not reflect our expectations related to the pending XCL Acquisition.

Our realized price on a per BOE basis increased $1.53 sequentially and $2.16 YTD 2024-over-YTD 2023, primarily as a result of an increase in oil benchmark prices.

For the three months ended June 30, 2024, and March 31, 2024, we recognized net gains on the settlement of our commodity derivative contracts of $1.15 per BOE and $1.01 per BOE, respectively.

For the six months ended June 30, 2024, and 2023, we recognized net gains on the settlement of our commodity derivative contracts of $1.08 per BOE and $0.76 per BOE, respectively.

LOE on a per BOE basis decreased 13 percent sequentially and increased two percent YTD 2024-over-YTD 2023.

The sequential quarterly decrease was a result of increased average net daily equivalent production and a decrease in workover expense due to timing of activity.

The YTD 2024-over-YTD 2023 increase was primarily driven by increases in labor costs and certain other operating costs, partially offset by a decrease in workover expense due to timing of activity.

For the full-year 2024, we expect LOE on a per BOE basis to increase, compared with 2023, primarily as a result of expected increases in labor costs and certain other operating costs associated with both our Midland Basin and South Texas assets.

We anticipate volatility in LOE on a per BOE basis as a result of changes in total production, changes in our overall production mix, timing of workover projects, and industry activity, all of which affect total LOE.

Transportation costs on a per BOE basis remained flat sequentially and decreased 26 percent YTD 2024-over-YTD 2023 as a result of the expiration of a long-term contract in South Texas on June 30, 2023.

Transportation costs on a per BOE basis decreased six percent sequentially as the 12 percent increase in net equivalent production from our South Texas assets consisted primarily of increased oil production which incurs lower transportation costs than gas production.

Transportation costs on a per BOE basis decreased 30 percent YTD 2024-over-YTD 2023 primarily as a result of the expiration of a long-term contract in South Texas on June 30, 2023.

In general, we expect total transportation costs to fluctuate relative to changes in gas and NGL production from our South Texas assets, where we incur a majority of our transportation costs.

For the full-year 2024, we expect transportation costs on a per BOE basis to decrease compared with 2023, as a result of the expiration of the long-term contract in South Texas previously discussed.

Production tax expense on a per BOE basis decreased four percent sequentially and six percent YTD 2024-over-YTD 2023, primarily as a result of decreases in total realized price per BOE.

Our overall production tax rate for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, was 4.5 percent, 4.6 percent, and 4.7 percent, respectively.

Production tax expense on a per BOE basis remained flat sequentially and increased three percent YTD 2024-over-YTD 2023, primarily as a result of an increase in total realized price per BOE.

Our overall production tax rate for the three and six months ended June 30, 2024, was 4.3 percent and 4.4 percent, respectively, compared with 4.5 percent for each of the three months ended March 31, 2024, and the six months ended June 30, 2023.

We generally expect production tax expense to correlate with oil, gas, and NGL production revenue on an absolute and per BOE basis.

Product mix, the location of production, and incentives to encourage oil and gas development can also impact the amount of production tax expense that we recognize.

Ad valorem tax expense on a per BOE basis increased 141 percent sequentially as ad valorem tax expense recorded during the three months ended December 31, 2023, reflected the positive impact of a property tax relief bill that provided for a one-time benefit during 2023.

Ad valorem tax expense on a per BOE basis increased 10 percent YTD 2024-over-YTD 2023 as a result of changes to the assessed values of our producing properties.

Ad valorem tax expense on a per BOE basis decreased eight percent sequentially and increased five percent YTD 2024-over-YTD 2023, as a result of changes to the assessed values of our producing properties.

We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes, which is generally driven by fluctuations in commodity prices.

Depletion, depreciation, amortization, and asset retirement obligation liability accretion (“DD&A”) expense on a per BOE basis decreased six percent sequentially primarily as a result of a decrease in our DD&A rate due to increased estimated net proved reserves at year-end 2023.

DD&A expense on a per BOE basis increased eight percent YTD 2024-over-YTD 2023 due to inflation and a slight shift in production mix resulting from higher activity in our Midland Basin assets, which have a higher DD&A rate than our South Texas assets.

Depletion, depreciation, amortization, and asset retirement obligation liability accretion (“DD&A”) expense on a per BOE basis remained flat sequentially.

DD&A expense on a per BOE basis increased nine percent YTD 2024-over-YTD 2023 due to inflation and a slight shift in production mix resulting from higher activity in our Midland Basin assets, which have a higher DD&A rate than our South Texas assets.

Our DD&A rate fluctuates as a result of changes in our production mix, changes in our total estimated net proved reserve volumes, changes in capital allocation, impairments, acquisition and divestiture activity, and carrying cost funding and sharing arrangements with third parties.

For the full-year 2024, we expect DD&A expense per BOE to remain flat and DD&A expense on an absolute basis to increase slightly, compared with 2023, primarily as a result of expected increased production.

General and administrative (“G&A”) expense on a per BOE basis decreased 12 percent sequentially primarily as a result of decreased compensation expense.

For the full-year 2024, we expect DD&A expense per BOE to remain relatively flat and DD&A expense on an absolute basis to increase slightly, compared with 2023, primarily as a result of expected increased production.

General and administrative (“G&A”) expense on a per BOE basis decreased six percent sequentially primarily as a result of increased net equivalent production volumes.

G&A expense on a per BOE basis increased nine percent YTD 2024-over-YTD 2023 as a result of increased compensation expense due to inflation.

For the full-year 2024, we expect G&A expense to remain relatively flat per BOE, and G&A expense on an absolute basis to increase compared with 2023, primarily as a result of increases in compensation expense due to inflation.

Please refer to Comparison of Financial Results and Trends Between the Three Months Ended March 31, 2024, and December 31, 2023, and Between the Three Months Ended March 31, 2024, and 2023 below for additional discussion of operating expenses.

Comparison of Financial Results and Trends Between the Three Months Ended March 31, 2024, and December 31, 2023, and Between the Three Months Ended March 31, 2024, and 2023

For the full-year 2024, we expect G&A expense to remain relatively flat

per BOE, and G&A expense on an absolute basis to increase compared with 2023, primarily as a result of increases in compensation expense due to inflation.

Please refer to Comparison of Financial Results and Trends Between the Three Months Ended June 30, 2024, and March 31, 2024, and Between the Six Months Ended June 30, 2024, and 2023 below for additional discussion of operating expenses.

Comparison of Financial Results and Trends Between the Three Months Ended June 30, 2024, and March 31, 2024, and Between the Six Months Ended June 30, 2024, and 2023

Average net daily equivalent production, oil, gas, and NGL production revenue, and oil, gas, and NGL production expense

Sequential Quarterly Changes.

The following table presents changes in our average net daily equivalent production, oil, gas, and NGL production revenue, and oil, gas, and NGL production expense, by area, between the three months ended March 31, 2024, and December 31, 2023:

Average Net Equivalent Production

Decrease Oil, Gas, and NGL

Increase Oil, Gas, and NGL

Production Revenue

Decrease Oil, Gas, and NGL

Increase Oil, Gas, and NGL

Production Expense

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Amounts may not calculate due to rounding.

Average net daily equivalent production volumes decreased five percent, consisting of an eight percent decrease from our South Texas assets and a three percent decrease from our Midland Basin assets.

Total realized price per BOE remained flat.

As a result of the decrease in average net daily equivalent production volumes, oil, gas, and NGL production revenue decreased eight percent.

Oil, gas, and NGL production expense remained flat, as an increase in ad valorem tax expense was offset by decreases in production tax expense, transportation costs, and LOE.

Average net daily equivalent production volumes increased nine percent, consisting of increases of 12 percent and seven percent from our South Texas and Midland Basin assets, respectively.

Total realized price per BOE increased four percent.

As a result of the increase in average net daily equivalent production volumes, oil, gas, and NGL production revenue increased 13 percent.

Oil, gas, and NGL production expense remained flat, as increases in production tax expense and transportation costs were offset by a decrease in LOE.

YTD 2024-over-YTD 2023 Changes.

Average Net Equivalent Production Increase (Decrease) Oil, Gas, and NGL

Production Revenue

Increase (Decrease) Oil, Gas, and NGL

Increase Oil, Gas, and NGL

Production Expense

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Amounts may not calculate due to rounding.

Average net daily equivalent production volumes remained flat, as a three percent decrease from our South Texas assets was partially offset by a one percent increase from our Midland Basin assets.

Total realized price per BOE decreased slightly, and combined with flat average net daily equivalent production volumes, resulted in oil, gas, and NGL production revenue remaining flat.

Oil, gas, and NGL production expense decreased three percent, primarily driven by a decrease in transportation costs, partially offset by an increase in LOE.

Average net daily equivalent production volumes remained flat, as a five percent increase from our Midland Basin assets was mostly offset by a three percent decrease from our South Texas assets.

Total realized price per BOE increased five percent and, combined with increases in oil and NGL benchmark commodity prices, resulted in a seven percent increase in oil, gas, and NGL production revenue.

Oil, gas, and NGL production expense decreased five percent, primarily driven by a decrease in transportation costs, partially offset by increases in LOE and production tax expense.

Please refer to Overview of Selected Production and Financial Information, Including Trends above for additional discussion, including discussion of trends on a per BOE basis.

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

(in millions)

Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 179.7 $ 166.2 $ 345.8 $ 312.0

DD&A expense decreased 12 percent sequentially and increased eight percent YTD 2024-over-YTD 2023.

The sequential quarterly decrease was primarily driven by a decrease in our DD&A rate and a decrease in average net daily equivalent production.

The YTD 2024-over-YTD 2023 increase resulted from inflation and a slight shift in production mix resulting from higher activity in our

Midland Basin assets, which have a higher DD&A rate than our South Texas assets.

DD&A expense increased eight percent sequentially and 11 percent YTD 2024-over-YTD 2023.

The sequential quarterly increase was primarily driven by an increase in average net daily equivalent production.

The YTD 2024-over-YTD 2023 increase resulted from inflation and a slight shift in production mix resulting from higher activity in our Midland Basin assets, which have a higher DD&A rate than our South Texas assets.

Please refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of DD&A expense on a per BOE basis.

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

(in millions)

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Total $ 17.1 $ 18.6 $ 35.7 $ 33.4

Exploration expense increased 17 percent sequentially primarily as a result of expenses incurred related to one well deemed non-commercial, partially offset by a decrease in exploration overhead expense.

Exploration expense remained flat YTD 2024-over-YTD 2023.

Exploration expense decreased eight percent sequentially primarily as a result of expenses incurred related to one well deemed non-commercial, which primarily affected the three months ended March 31, 2024, partially offset by an increase in exploration overhead expense.

The YTD 2024-over-YTD 2023 increase of seven percent was primarily due to an increase in geological and geophysical expense.

Exploration expense fluctuates based on actual geological and geophysical studies we perform within an exploratory area, exploratory dry hole expense incurred, and changes in the amount of allocated overhead.

General and administrative

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

(in millions)

General and administrative $ 31.1 $ 30.2 $ 61.3 $ 55.2

G&A expense decreased 18 percent sequentially primarily as a result of decreased compensation expense.

G&A expense recorded during the three months ended December 31, 2023, reflected an increase to compensation expense resulting from the Company’s full-year performance against targets established at the beginning of the year.

G&A expense increased nine percent YTD 2024-over-YTD 2023 primarily as a result of increased compensation expense due to inflation.

G&A expense increased three percent sequentially and 11 percent YTD 2024-over-YTD 2023 as a result of increases in compensation expense, and inflation.

Please refer to the section Overview of Selected Production and Financial Information, Including Trends above for discussion of G&A expense on a per BOE basis.

Net derivative (gain) loss

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

(in millions)

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Interest expense

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

(in millions)

Interest expense $ (21.8) $ (21.9) $ (43.7) $ (44.6)

Interest expense decreased nine percent sequentially and three percent YTD 2024-over-YTD 2023 primarily driven by an increase in capitalized interest as a result of the timing of the development of our wells in progress.

Total interest expense can vary based on the timing and amount of borrowings under our revolving credit facility.

Interest expense remained flat sequentially and decreased two percent YTD 2024-over-YTD 2023.

Total interest expense can vary based on fluctuations in the amount of capitalized interest as a result of the timing of the development of our wells in progress and due to the timing and amount of borrowings under our revolving credit facility.

Please refer to Overview of Liquidity and Capital Resources below and to Note 5 - Long-Term Debt in Part I, Item 1 of this report for additional discussion.

Income tax expense

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

(in millions, except tax rate)

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Effective tax rate 20.3 % 19.6 % 20.1 % 21.9 %

Our effective tax rate increased sequentially as the positive impact of the R&D credit claimed during the three months ended December 31, 2023, was higher than for the three months ended March 31, 2024.

Our effective tax rate decreased YTD 2024-over-YTD 2023 primarily due to the benefit recognized from anticipated qualified R&D credit claims in 2024.

The tax rates for each period presented also reflect the proportional effects of state income taxes, limits on expensing of certain covered individual’s compensation, and the cumulative effect of other small differences.

The sequential quarterly increase in the effective tax rate is primarily due to the effect of higher forecast net income.

The YTD 2024-over-YTD 2023 decrease in the effective tax rate is primarily due to the benefit recognized from anticipated qualified R&D credit claims in 2024.

Based on current projections, we estimate that after utilization of a portion of the R&D credits, between $25.0 million and $35.0 million of full-year 2024 income tax expense will be current.

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Effective for tax years beginning after December 31, 2022, the Inflation Reduction Act of 2022 provides for a 15 percent corporate alternative minimum tax (“CAMT”) on corporations with average adjusted financial statement income over $1.0 billion for any three-year period preceding the tax year.

Please refer to Overview of Liquidity and Capital Resources below and to the Risk Factors section in Part 1, Item 1A of our 2023 Form 10-K for additional discussion.

The CAMT could become applicable to us beginning in 2025.

Please refer to Overview of Liquidity and Capital Resources below and to the Risk Factors section in Part 1, Item 1A of our 2023 Form 10-K , and Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on July 18, 2024, for additional discussion.

Overview of Liquidity and Capital Resources

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Sources of Cash

For the three months ended March 31, 2024, we funded our capital expenditures and return of capital program with cash flows from operating activities and cash on hand, and we expect that to continue for the remainder of 2024.

For the six months ended June 30, 2024, we funded our capital expenditures and return of capital program with cash flows from operating activities and cash on hand, and we expect that to continue for the remainder of 2024.

However, we may also use borrowings under our revolving credit facility or raise funds through new debt or equity offerings or from other sources of financing.

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Additionally, we may enter into carrying cost and sharing arrangements with third parties for certain exploration or development programs.

Subsequent to June 30, 2024, we issued our New Senior Notes.

Please see below for discussion on the intended use of the net proceeds received, and refer to Note 5 - Long-Term Debt in Part I, Item I of this report for additional discussion.

Our credit ratings affect the availability of, and cost for us to borrow, additional funds.

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Our Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $3.0 billion.

As of March 31, 2024, the borrowing base and aggregate lender commitments under our Credit Agreement were $2.5 billion and $1.25 billion, respectively.

As of June 30, 2024, the borrowing base and aggregate lender commitments under our Credit Agreement were $2.5 billion and $1.25 billion, respectively.

The borrowing base is subject to regular, semi-annual redetermination, which considers the value of both our proved oil and gas properties reflected in our most recent reserve report and commodity derivative contracts, each as determined by our lender group.

Subsequent to March 31, 2024, the semi-annual borrowing base redetermination was completed, which reaffirmed both our borrowing base and aggregate lender commitments at existing amounts.

The next scheduled borrowing base redetermination date is October 1, 2024.

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We must comply with certain financial and non-financial covenants under the terms of the Credit Agreement.

We were in compliance with all financial and non-financial covenants under the Credit Agreement as of March 31, 2024, and through the filing of this report.

Please refer to Note 5 - Long-Term Debt in Part I, Item 1 of this report for additional discussion, as well as the presentation

of the outstanding balance, total amount of letters of credit, and available borrowing capacity under the Credit Agreement as of April 25, 2024, March 31, 2024, and December 31, 2023.

We had no revolving credit facility borrowings during the three months ended March 31, 2024, or at any time during 2023.

We were in compliance with all financial and non-financial covenants under the Credit Agreement as of June 30, 2024, and through the filing of this report.

Please refer to Note 5 - Long-Term Debt in Part I, Item 1 of this report for additional discussion, as well as the presentation of the outstanding balance, total amount of letters of credit, and available borrowing capacity under the Credit Agreement as of July 31, 2024, June 30, 2024, and December 31, 2023.

We had no revolving credit facility borrowings during the six months ended June 30, 2024, or at any time during 2023.

Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities including open market debt repurchases, debt redemptions, repayment of scheduled debt maturities, other financing activities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving credit facility.

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The following table presents our weighted-average interest rates and our weighted-average borrowing rates for the periods presented:

For the Three Months Ended

March 31, 2024 December 31, 2023 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 March 31, 2024 June 30, 2024 June 30, 2023

Weighted-average interest rate 7.1 % 7.1 % 7.1 % 7.1 %

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Expenditures for the development, exploration, and acquisition of oil and gas properties are the primary use of our capital resources.

During the three months ended March 31, 2024, we spent $332.4 million on capital expenditures.

This amount differs from the costs incurred amount of $320.2 million for the three months ended March 31, 2024, as costs incurred is an accrual-based amount that also includes asset retirement obligations, geological and geophysical expenses, acquisitions of oil and gas properties, and exploration overhead amounts.

During the six months ended June 30, 2024, we spent $655.0 million on capital expenditures.

This amount differs from the costs incurred amount of $652.1 million for the six months ended June 30, 2024, as costs incurred is an accrual-based amount that also includes asset retirement obligations, geological and geophysical expenses, acquisitions of oil and gas properties, and exploration overhead amounts.

The amount and allocation of our future capital expenditures will depend upon a number of factors, including our cash flows from operating, investing, and financing activities, our ability to execute our development program, inflation, and the number and size of acquisitions that we complete.

In addition, the impact of oil, gas, and NGL prices on investment opportunities, the availability of capital, tax law and other regulatory changes, and the timing and results of our exploration and development activities may lead to changes in funding requirements for future development.

We periodically review our capital expenditure budget and guidance to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors.

Our total 2024 capital program, which we expect to fund with cash flows from operations, is expected to be between $1.14 billion and $1.18 billion, excluding acquisitions.

This reflects a decrease from our original expectation primarily as a result of capital efficiencies and lower-than-expected costs.

We periodically review our capital expenditure budget and guidance to assess if changes

are necessary based on current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors.

Our total 2024 capital program, which we expect to fund with cash flows from operations, is expected to be between $1.14 billion and $1.18 billion, excluding acquisitions, and excluding any expected capital expenditures related to the Uinta Basin Assets and the Option Assets.

Upon execution of the XCL Acquisition Agreement on June 27, 2024, we deposited with an escrow agent a cash deposit of $102.0 million equal to five percent of our undivided 80 percent of the XCL Purchase Price.

On July 25, 2024, we issued a redemption notice irrevocably obligating us to redeem all of our outstanding 2025 Senior Notes.

We intend to use a portion of the net proceeds from our New Senior Notes to redeem all of our outstanding 2025 Senior Notes, and the remaining net proceeds from the New Senior Notes, cash on hand, and borrowings under our revolving credit facility to fund the balance of the XCL Purchase Price.

Please refer to Note 5 - Long-Term Debt and Note 11 - Acquisitions in Part I, Item I of this report for additional discussion.

We may from time to time repurchase shares of our common stock, or repurchase or redeem all or portions of our outstanding debt securities, for cash, through exchanges for other securities, or a combination of both.

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The amounts involved in any such transaction may be material.

During the three months ended March 31, 2024, and 2023, we repurchased and subsequently retired 0.7 million and 1.4 million shares, respectively, of our common stock at a cost of $32.8 million and $40.0 million, respectively, excluding excise taxes, commissions, and fees.

As of March 31, 2024, $182.1 million remained available under the Stock Repurchase Program for repurchases of our common stock through December 31, 2024.

During the six months ended June 30, 2024, and 2023, we repurchased and subsequently retired 1.8 million and 4.0 million shares, respectively, of our common stock at a cost of $84.0 million and $108.8 million, respectively, excluding excise taxes, commissions, and fees.

Additionally, in the second quarter of 2024, our Board of Directors re-authorized our existing Stock Repurchase Program, authorizing us to repurchase up to $500.0 million in aggregate value of our common stock through December 31, 2027.

As of June 30, 2024, following the re-authorization of our existing Stock Repurchase Program, $500.0 million was available under the Stock Repurchase Program.

Please refer to Note 3 - Equity in Part I, Item 1 of this report for additional discussion.

During the three months ended March 31, 2024, and 2023, we paid $20.8 million and $18.3 million, respectively, in dividends to our stockholders.

During the six months ended June 30, 2024, and 2023, we paid $41.5 million and $36.4 million, respectively, in dividends to our stockholders.

Additionally, our Board of Directors approved an increase to our fixed dividend policy, pursuant to which we intend to pay $0.80 per share annually, to be paid in quarterly increments of $0.20 per share, beginning in the fourth quarter of 2024.

We currently intend to continue paying dividends to our stockholders for the foreseeable future, subject to our future earnings, our financial condition, covenants under our Credit Agreement and indentures governing each series of our outstanding Senior Notes, and other factors that could arise.

The payment and amount of future dividends remain at the discretion of our Board of Directors.

Changes in federal income tax laws, specifically the CAMT, could increase our corporate income tax rate and could eliminate or reduce current tax deductions.

While the CAMT is not currently applicable to us, it and other possible future legislation could reduce our net cash provided by operating activities over time, which could result in a reduction of available funding.

Analysis of Cash Flow Changes Between the Three Months Ended March 31, 2024, and 2023

The following tables present changes in cash flows between the three months ended March 31, 2024, and 2023, for our operating, investing, and financing activities.

Changes in federal income tax laws could increase our corporate income tax rate and could eliminate or reduce current tax deductions.

The CAMT could become applicable to us beginning in 2025.

The CAMT and other possible future legislation could reduce our net cash provided by operating activities resulting in a reduction of available funding.

Analysis of Cash Flow Changes Between the Six Months Ended June 30, 2024, and 2023

The following tables present changes in cash flows between the six months ended June 30, 2024, and 2023, for our operating, investing, and financing activities.

The analysis following each table should be read in conjunction with our accompanying statements of cash flows in Part I, Item 1 of this report.

Operating activities

For the Three Months Ended March 31, Amount Change Between Periods

For the Six Months Ended June 30, Amount Change Between Periods

(in millions)

Net cash provided by operating activities $ 752.4 $ 714.9 $ 37.5

Net cash provided by operating activities decreased for the three months ended March 31, 2024, compared with the same period in 2023, primarily as a result of a $46.8 million decrease in cash received from oil, gas, and NGL production revenue net of transportation costs and production taxes and an increase of $17.5 million in cash paid for G&A expense, partially offset by a $31.3 million decrease in cash paid on settled derivative trades.

Net cash provided by operating activities increased for the six months ended June 30, 2024, compared with the same period in 2023, primarily as a result of a $46.6 million increase in cash received from oil, gas, and NGL production revenue net of transportation costs and production taxes and a decrease of $34.4 million in cash paid on settled derivative trades, partially offset by an increase of $20.3 million in cash paid for G&A expense.

Net cash provided by operating activities is also affected by working capital changes and the timing of cash receipts and disbursements.

Investing activities

For the Three Months Ended March 31, Amount Change Between Periods

For the Six Months Ended June 30, Amount Change Between Periods

(in millions)

Net cash used in investing activities $ (655.0) $ (638.2) $ (16.8)

Net cash used in investing activities increased for the three months ended March 31, 2024, compared with the same period in 2023, as a result of a $91.7 million increase in capital expenditures.

Net cash used in investing activities during the three months ended March 31, 2024, was funded by net cash provided by operating activities and cash on hand.

Net cash used in investing activities increased for the six months ended June 30, 2024, compared with the same period in 2023, as a result of a $105.0 million increase in capital expenditures, partially offset by an $88.8 million decrease in cash paid to acquire proved and unproved oil and gas properties in the Midland Basin.

Financing activities

For the Three Months Ended March 31, Amount Change Between Periods

For the Six Months Ended June 30, Amount Change Between Periods

(in millions)

Net cash used in financing activities $ (123.7) $ (143.4) $ 19.7

Net cash used in financing activities for the three months ended March 31, 2024, primarily related to $32.8 million of cash paid, including commissions and fees, to repurchase and subsequently retire 0.7 million shares of our common stock under the Stock Repurchase Program and $20.8 million of dividends paid to our stockholders.

Net cash used in financing activities for the three months ended March 31, 2023, related to $40.1 million of cash paid, including commissions and fees, to repurchase and subsequently retire 1.4 million shares of our common stock under the Stock Repurchase Program and $18.3 million of dividends paid to our stockholders.

Net cash used in financing activities for the six months ended June 30, 2024, primarily related to $84.0 million of cash paid, including commissions and fees, to repurchase and subsequently retire 1.8 million shares of our common stock under the Stock Repurchase Program and $41.5 million of dividends paid to our stockholders.

Net cash used in financing activities for the six months ended June 30, 2023, related to $108.9 million of cash paid, including commissions and fees, to repurchase and subsequently retire 4.0 million shares of our common stock under the Stock Repurchase Program and $36.4 million of dividends paid to our stockholders.

Interest Rate Risk

We are exposed to market and credit risk due to the floating interest rate associated with any outstanding balance on our revolving credit facility.

Our Credit Agreement allows us to fix the interest rate for all or a portion of the principal balance of our revolving credit facility for a period up to six months.

Our Credit Agreement allows us to fix the interest rate for all or a portion of the principal balance of our revolving credit facility for a period of up to six months.

To the extent that the interest rate is fixed, interest rate changes will affect the revolving credit facility’s fair value but will not affect results of operations or cash flows.

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Changes in interest rates do not affect the amount of interest we pay on our fixed-rate Senior Notes, but can affect their fair values.

As of March 31, 2024, our outstanding principal amount of fixed-rate debt totaled $1.6 billion, and we had no floating-rate debt outstanding.

As of June 30, 2024, our outstanding principal amount of fixed-rate debt totaled $1.6 billion, and we had no floating-rate debt outstanding.

Please refer to Note 8 - Fair Value Measurements in Part I, Item 1 of this report for additional discussion on the fair values of our Senior Notes.

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The realized prices we receive for our production also depend on numerous factors that are typically beyond our control.

Based on our production for the three months ended March 31, 2024, a 10 percent decrease in our average realized oil, gas, and NGL prices would have reduced our oil, gas, and NGL production revenue by approximately $44.1 million, $6.8 million, and $5.1 million, respectively.

If commodity prices had been 10 percent lower, our net derivative settlements for the three months ended March 31, 2024, would have offset the declines in oil, gas, and NGL production revenue by approximately $11.9 million.

Based on our production for the six months ended June 30, 2024, a 10 percent decrease in our average realized oil, gas, and NGL prices would have reduced our oil, gas, and NGL production revenue by approximately $97.3 million, $11.3 million, and $10.7 million, respectively.

If commodity prices had been 10 percent lower, our net derivative settlements for the six months ended June 30, 2024, would have offset the declines in oil, gas, and NGL production revenue by approximately $16.4 million.

We enter into commodity derivative contracts in order to reduce the risk of fluctuations in commodity prices.

The fair value of our commodity derivative contracts is largely determined by estimates of the forward curves of the relevant price indices.

As of March 31, 2024, a 10 percent increase or decrease in the forward curves associated with our oil, gas, and NGL commodity derivative instruments would have changed our net derivative positions for these products by approximately $34.4 million, $6.4 million, and $6.6 million, respectively.

As of June 30, 2024, a 10 percent increase or decrease in the forward curves associated with our oil, gas, and NGL commodity derivative

instruments would have changed our net derivative positions for these products by approximately $51.7 million, $28.1 million, and $5.6 million, respectively.

Off-Balance Sheet Arrangements

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If we determine that we are the primary beneficiary of a variable interest entity, that entity is consolidated into our consolidated financial statements.

We have not been involved in any unconsolidated SPE transactions during the three months ended March 31, 2024, or through the filing of this report.

We have not been involved in any unconsolidated SPE transactions during the six months ended June 30, 2024, or through the filing of this report.

Critical Accounting Estimates

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Non-GAAP Financial Measures

impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items.

Adjusted EBITDAX represents net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items.

Adjusted EBITDAX excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated.

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The following table provides reconciliations of our net income (GAAP) and net cash provided by operating activities (GAAP) to adjusted EBITDAX (non-GAAP) for the periods presented:

For the Three Months Ended

2024 December 31, 2023 March 31,

For the Three Months Ended For the Six Months Ended

2024 June 30,

2023 June 30,

2024 June 30,

(in thousands)

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Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying statements of operations for the component of stock-based compensation expense recorded to exploration expense.

(2) For the three months ended March 31, 2024, amount excludes certain capital expenditures primarily related to one well deemed non-commercial.

For three months ended December 31, 2023, amount excludes immaterial non-cash adjustments.

For the three months ended March 31, 2023, amount excludes certain capital expenditures primarily related to unsuccessful exploration activity for one well that experienced technical issues during the drilling phase.

(2) For the three and six months ended June 30, 2024, amounts exclude certain capital expenditures primarily related to one well deemed non-commercial.

For the three and six months ended June 30, 2023, amounts exclude certain capital expenditures primarily related to unsuccessful exploration activity for one well that experienced technical issues during the drilling phase.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis